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Holiday Pay – Are You Getting It Right?

As we build-up to the holiday season, it is important that we are getting the correct pay to spend on our vacation.

A series of cases over the past few years had influenced how much holiday pay employees should receive. In 2019, the Court of Appeal upheld a tribunal decision and agreed that voluntary overtime pay should be reflected in holiday pay, as long as those payments constitute ‘normal’ remuneration. And it means that many companies could have to pay their staff a lot more than their contractual pay.

In short, where an employee normally works overtime and/or gets a regular commission, this should be included in the calculation of their holiday pay. If employers do not follow, it could result in a successful ‘unlawful deduction from wages’ claim.

This change is primarily the result of a long-running tribunal case between Flowers vs East of England Ambulance Trust in 2017. The tribunal found in favour of the ambulance drivers and confirmed that voluntary overtime should contribute to holiday pay calculations. The drivers regularly volunteered to work overtime due to staff shortages. But the Ambulance Trust only paid the contracted rate for holiday leave. The tribunal ruled that the Trust should include voluntary overtime in holiday pay if the overtime is ‘sufficiently regular and settled’. And the Court of Appeal agreed.

In addition, the Dudley Council vs Willets case came to a similar decision. This EAT ruled that where an employer makes regular payments for voluntary overtime to his or her staff, the employer must take these payments into account when working out holiday pay for the first four weeks.

Worryingly, there is no definition of how regularly overtime must be worked for it to be included in holiday pay. ACAS confirm that overtime worked on a “genuinely occasional and infrequent basis”, doesn’t need to count as part of a statutory holiday pay calculation. Further, in February of this year, the government announced that the reference period of determining a week’s pay for the purpose of calculating holiday pay will be increased to 52 weeks from 6th April 2020.

And as the findings are backed up by European Law and differences between UK minimum statutory holiday (28 days / 5.6 weeks) and the EU minimum of 4 weeks, it is anyone’s guess what may happen after Brexit….